Malta, the Blockchain Island!

There have been loads of developments in the regulation and compliance within the blockchain space recently. In fact, clarity and new laws for this sector have been springing up and growing exponentially in the 2 years. Alongside the new regulations on the treatment of companies and assets in the industry, new jurisdictions have paved the way forward innovating and offering solutions and answers of how to work and deal with the blockchain or distributed ledger technology (DLT) space as it is often referred. One of those jurisdictions trying to lead the innovation and implementation of regulation and laws concerning DLT technology is Malta. One of the fastest growing economies in the EU and the world with 6.6% growth rate for 2018, GDP: 19B, public debt 50% of GDP, an inflation rate of 1.3 % and an unemployment rate of 4.6% *, the country offers the perfect foundations. In addition, to a booming economy, the country has managed to bring in many international DLT companies. The blockchain island. That is how Malta has been deemed by many internationally. From DLT insiders to governmental officials, a sense of security, understanding, and welcome is to be felt by DLT businesses looking to relocate on the island while more than half of the world has a negative or neutral position on having those businesses run from their countries. This small nation nestled on a beautiful rocky island in the Middle of the Mediterranean is offering not only amazing weather all year-around, beautiful beaches, and delicious food, but also the perfect hotbed and legal jurisdiction for blockchain companies. The video content prepared by Cointelegraph gives you a taste of the atmosphere on the island.

Who are some of those big blockchain companies and why are they moving to Malta? A throve of big hitters in the DLT space including two of the largest exchanges Binance & OKex are opening offices and setting up their HQs under the Maltese Jurisdiction and legal frameworks.  The Maltese government have managed to act swiftly into offering the assurance and assistance of business in the industry while trying to understand and communicate with insiders in the space. Three bills have been passed by the Government that creates this favourable environment to set up a blockchain business under the country’s law. The first bill, called Malta Digital Innovation Authority Bill means that the government provides credibility and legal assurance. The second one, the Innovative Technology Arrangements Bill, deals with easing the way of registration and legitimization of a blockchain business in the small nation. The third one is the Services and Virtual Financial Assets Bill that provides a solid framework for cryptocurrencies, ICOs, wallet providers, exchanges and asset managers. With the hope that the legislation will bring more blockchain companies to the island added to favourable tax laws on international corporations with as little as 5% are also a deciding factor for those businesses looking at the island. Moreover, Malta is a strong member of the EU allowing companies that decide to set up business their access to the free trade within the European market. This, of course, will bring along foreign investments and employment opportunities that are vital for a small country with little natural resources or manufacturing facilities. The country has a much bigger plan in place

blockchain-strategy

Although Malta is not only after the financial benefits of bringing blockchain business under its wings. The regulatory and legislative bodies also make careful consideration of the nature of the business seeking to understand and legitimize it rather than accept it unconditionally. Malta is focusing on blockchain technology and its intricacies rather than short financial gains from facilitating cryptocurrency transactions.

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Source: One of the main ports of Malta brought by Pixabay

Malta is not only seeking to accommodate blockchain companies rather become an innovation hub for technology entrepreneurs and startups. The island nation has tackled well the last digital trend of business with Gaming and Online Gambling and it is well underway of riding the wave of the new blockchain trend. Moreover, the Maltese are already eyeing up the Artificial Intelligence revolution that is also underway and want to accommodate AI companies alongside the DLT ones. Malta.ai hosts the national initiative towards the development of an AI strategy and encouragement of companies and national policies. This move would create an amalgamation of technology pioneers nestled together in the speck in the Mediterranean working on complicated technological problems seeking to push the technology world forward.

 

*National Economic Data for Malta taken from – https://tradingeconomics.com/malta/gdp-growth

How to launch your own E-commerce store?

The world of commerce is shifting exponentially from a person to person live exchange of products and services in a retail or physical location to the digital. Nowadays if you have a great product that you have created and you wish to get it out to the public it is no longer necessary to dig deep into your pockets looking for cash to rent a brick and mortar store so you can gain visibility in the public and start selling. No longer is needed to put billboards or posters on the streets or give out flyers about your new offering. The world is changing fast and the only thing you need these days to reach out to your customers and sell the great product you have created is a laptop and an internet connection. If you don’t have a great idea about a product you want to sell yet. There are many resources where you can do research and market analysis online. Picking the best products to sell is a big challenge. Many times people would have the product beforehand though more often than not we also have people wanting to start an e-commerce venture without the definite product idea in their mind. Coming up with an adequate product is done through idea generation. Brainstorming and market research in places like AliExpress Most Popular Products, Amazon Best Sellers, eBay Daily Deals, etc. Looking out for popular categories, items, trends, seasonal products or just something that makes sense to you is key. Another key is niching down in with the particular category or product. You need to look to supply niche products that are underserved by larger players. Don’t fight the big stores and try to avoid too broad and general categories. The masses are already exposed to thousands of offers daily. You can also use social shopping sites – There are over 100 million products on Polyvore and 30 million on Wanelo, Fancy, and Pinterest. Find out what is popular what is liked and what are the current and future upcoming trends. Don’t limit yourself to your own research rather speak with friends and discuss your ideas and brainstorming. Add a price filter that gives you enough mark-up on inventory and accounts for marketing costs. Use Google keywords planner and google trends to find out if your idea is actually trending or it is on the rise. Read the search patterns and look for trends. Remember, that you have to avoid any branded products as you may stumble upon faces or copyright infringement laws.

Assuming you have managed to find or create your groundbreaking product and the market to sell to, this article is going to look at what is required for you to create an online e-commerce store where you can sell this product. When we think about e-commerce, names such as Alibaba and Amazon may spring to mind. Although there are 100s of thousands of private label e-commerce stores that sell their unique products. Think of it as your “street corner shop” in the digital world.

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Source

Before you start thinking about your website design and colors you are going to use, creating an initial business plan can greatly boost your success chances. Having a business plan can greatly help you at organizing your ideas, tools, costs and generally putting everything in one place where you can easily refer and develop your next step with your idea. One of the most important aspects of your business plan would be choosing your niche and the product you would like to be selling. Doing a comprehensive market and competition research is of paramount to your success before looking into where would you like to source your product from, how to do the marketing and reach out to your customers. Building out your market research and competitors list using excel alongside additional products is also a great way to brainstorm and progress with your store idea. Summarizing your business and lying down your purpose statement and main drivers and motivation to start your venture can give you a lot of clarity as well as expose any weaknesses in your idea. Creating a business and marketing strategy no matter how small your idea or market is, will allow you to get a full 360 view of your venture. Example content structure that would go into such a business plan can be seen in the picture below.

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You have your business plan now and you know exactly what, where and when is happening. The next big step would be actually registering your idea as a business in your country. That being either a sole proprietorship or a limited company. In the UK, HMRC company registration is done online which also offers a set of instructions, requirements, and support for setting up your venture. Once you have the legal aspect out of the way, the fun part comes in building out your store. Gone are the days of brick and mortars with limited reach to customers and expensive overheads. In a matter of minutes, you can have your very own online store with one of the best and most popular platforms out there – Shopify. One of the best solutions out there that I have personally used is Shopify. The company offers an online e-commerce platform website builder that is suitable for anyone from entrepreneurs, small businesses to high volume large merchants. A sleek website designs available, online support and a host of many different additional features, widgets and apps that come with the platform makes it a stable and flexible solution for your needs.  Alongside a comprehensive ecosystem of different widgets, add-ons, integrations, and apps, Shopify is one of the leaders within the e-commerce space. The Canadian company facilitates many small business owners and entrepreneurs to showcase their products and create a beautiful and sleek online store with great functionalities without having to hire expensive website developers on their payroll. Choosing a theme that aligns with the products and your branding is important in order to gain more visits and convert them to sales. Having a nice logo is also important, but don’t get too focused on this intricacies as the branding tend to change and develop over time. You can get a custom domain aligning with your brand from Shopify, but I also use Namecheap as a great service offering discounts on domains as well. The Google Office suite could provide you with everything you need for your digital office and running the administration of your business. a couple of other tools that I have found very useful and are must-haves, in my opinion, are Asana for project management and a good email marketing system like MailChimp.

Oberlo is a great tool to source products and drop-ship them from China straight away if you are reselling somebody else’s product or if you are looking to add up-sale additional products to your current offering. Oberlo works perfectly with Ali express. Moreover, you control your own margins and you can extract 100s of descriptions and products straight to your store. You are not bound to a suggested retail price (MSRP) and can decide your retail price on your own. You can also start with it immediately, for free. AliExpress dropshipping is possible even without contacting the supplier as the website does your intermediation. You won’t need an established business entity before starting
your online store. Though you will need one when you grow and start making sales each month.

Sales and marketing are one of the hardest parts to get right and one of the most important for running a financially healthy business venture. It’s critical that you have a marketing plan in place in order for your business to get the proper exposure to its customers. Depending on your type of product and customer base some channels for advertising work better than the others. Facebook advertising is possibly the most effective way to promote your products to more than 1.5 billion people around the world. Instagram & Pinterest are great for reaching out an audience base for a particular product or niche while LinkedIn is the go-to tool for B2B sales and professional services. Getting enough traffic to your store will be defined of your marketing toolbox and your understanding of the audience you are selling to. Prior to sending traffic to your eCommerce store, you are going to want to make sure that you have the highest chances of converting each visitor into a  buyer.  There are always going to be many other retailers selling the exact same products as you and most internet shoppers will be visiting at least three of their websites before making a decision on where to purchase from. Optimizing page titles, meta-keywords, meta-descriptions, unique digital content can increase your conversion rates. Yes, ranking high in organic search results will bring you hoards of customers through using different SEO techniques. No, you should not invest heavily (or at all) and hire an SEO company as the break-even point of spending on SEO and doing the basic techniques that are free may suffice.

This was a quick overview of some of the components required for you to kick off your e-commerce venture. Making your e-commerce online store is hard work. To create a sustainable online business, you must be ready to work your buns off. Additionally, an initial chunk of capital has to be committed as well as a good marketing strategy. Some of the biggest challenges that start-ups face are the lack of capital and marketing their products to their customers. You may have a great e-commerce store and product although the marketing of your business can make or break you.

How to run the Finances of a small business or start-up?

Finance can be an intimidating topic. Small businesses and start-ups think that running their Finances is complicated and hard. They think they need to hire a professional, they are not sure about what to put in each account or the tech-stack and software they need to be using. Many times they find themselves dubious on particular tax treatments, monthly and year-end accounts. Moreover, professionals in the space mystify their work using an approach where there is a one-way conversation – them teaching the client, making themselves indispensable and not working with their clients on an equal basis. Good news, the new technology and financial apps ecosystem is bringing this to a halt as running the Finances of a small business or start-up up to a particular size becomes manageable with the right guidance and tech-stack. Cloud Accounting, automating financial operations and taking advantage of different solutions for each part of your Finances can convert the process from a chore into a breeze. In this article, we are going to look at some of the latest Tech that can help you turn your Financial Operations into something easy you do rather than something hard that you don’t look forward to.

Starting off with the basics such as office and computer equipment, you wouldn’t really need anything but a laptop, phone and a co-working space. Gone are the days where you have to sign long-term leases for expensive office spaces as the new wave of co-working space offers flexibility, great facilities, easily scalable, a network and a community of like-minded people. Places like WeWork and CoWorker offer you all the facilities you need where even physical products businesses usually outsourcing their production or using third parties are completely separate from their production operations using these co-working spaces. Moreover, the Microsoft or Google Office suit combined with communication and project management solutions like Asana and Slack can streamline your processes and boost the level of teamwork within your company. The Microsoft and Google office solutions offer cloud storage so you wouldn’t have to worry about the security and accessibility of your company’s data.

When it comes down to you Finances optimum efficiency, automation of daily operations and support for commercial insights should be paramount. This is brought about by an eco-system of financial software solutions. Starting off with your bank and where you keep your cash, the days of traditional banking are numbered and digital contenders are already overtaking the retail space. In terms of commercial banking, there are some solutions that are currently on the market which are far from perfect though are inching in the right direction by the day – Tide, Coconut and Starling Bank for Business. Coconut even goes as far as preparing your accounts and tax embedded in your digital banking. Soon enough you won’t have to worry about your Tax and Year End accounts as these will be automatically generated and prepared by your Accounting system and sent to HMRC or the relevant authority in your country via a secure API access point.

The accounting system that you are going to use for recording your business’s transaction is of crucial importance as there is a lot of products out there that don’t really provide optimal results for your business. From my personal experience depending on the size of your business Xero is the best solution out there. Beautiful design, great user experience and interface paired with secure cloud storage and fast accessibility for your financials this solution should be at the centre of your financial information. Moreover, with a comprehensive Xero Marketplace of external applications that integrate seamlessly, it can really bring massive value. The marketplace’s applications can assist your business in every single domain of its operations. Let’s look at some examples:

  • Accounts receivable – starting with your sales and the money coming in the business there are a number of integrated solutions both for POS and Online payments side. Notable solutions are iZettle on the POS and Stripe for online payments.
  • Accounts Payable
    • Roger – streamlining your invoice payment process with the help of OCR (optical character recognition) reading and extraction of all the details of the invoice automatically (invoice no., date, supplier, VAT, coding, etc.); it then learns as you continue to use it paired with approval flow, payment and automatic reconciliation.
    • Pleo – Pleo is a new service to the UK market which has recently received a significant Investment Round and it is expanding rapidly. It offers pre-paid cards and an app that allows your employees to track and record every single personal expense. You can top-up these cards from your bank account and at the end of the month upload, all the transaction records to your Accounting system via an API. Insight is immediately available and administration time and costs are down to a minimum.
  • Payroll and HR – a new solution coming to the UK that I am particularly excited about is Pento. Pento is a solution that combines all the HR and staff payment processes into one. From onboarding, your staff on the system to getting everyone paid automatically through bank transfers and social security contributions submitted to the HMRC.
  • Financial Reporting – when it comes down to Month End and Yearly reporting Excel still is the king of the game though with the addition of Data Dear which is an Excel Add-on application that pulls your financial data from your Xero software. You can pull down all your financials with the click of a button. This can truly be a gamechanger to the insight generation from your data. Paired with a tool like Fathom that can produce visual insight for the non-financial users of information. You can produce truly outstanding reports and board packs for your investors.

There are many other areas of your business that can be ‘upgraded‘ with the right software in places such as CRM, Inventory, Debtor Tracking, and e-commerce. While being simply an overview of a particular tech stack and approach to your company’s Finances. This article gives you an idea of how to run an efficient, tech-driven Finances of your business in an environment where cost-savings and efficiency are crucial for development and getting ahead of the competition. You can pick and mix different type of additional software from the Xero eco-system or even look into using Voice Assistants and Python open-source programming for automating process and tasks within your business. Bottom line, staying tech-conscious and constantly being willing to change and improve would define your development and performance.

What’s next after graduating from World Quant University?

     Two years have gone by where so much has happened. From quitting jobs to travelling around 4 continents, relocating, volunteering and studying as I go. It has been an incredible journey so far and even more so considering that I was doing an online degree all along. Complete flexibility, financial savings and exploration of new concepts and ideas that I have never really thought worked like that or existed thanks to World Quant. In addition, getting the chance to create contacts and accomplish tasks that I didn’t know where to begin from can all be contributed to putting in work and not backing down from studying through the last two years. More than 12 courses one after the other with only a week or two breaks in between required consistency and persistence of delivery and studies as exams, projects and coursework in the University had a constant pressure being applied until the end. I could clearly see people falling behind, failing a course, and slowly a group of students that started 2 years ago was a group of completely different ones with only a handful people staying till the end. It has been an amazing journey and it has opened my eyes to a completely new world that I had no previous preconception that existed in the realms of Finance, Data Science & Programming. What looked like a way for me to improve my maths, programming skills and understanding of the markets and trading, has taken me down a rabbit hole of the discovery of many other subjects around it. This article looks at some of the courses, changes and impacts of my studies at World Quant University and what am I going to undertake following this degree. 

First of all, I will quickly go through the final tally of all the courses I passed as the University program has drastically been overhauled and the courses have been changed completely. Most of the knowledge and material covered in my studies is very similar although it is reviewed in a different manner with a focus on a different type of learning outcomes and study path. For further information on my first experiences of the University can be found on one of my previous posts here. Overall, I am happy with the course studied which have delivered what I wanted to get out the most of the degree – learning programming and its application on the different financial markets. Please see the courses covered below:

  •  Financial Markets I – instruments traded in the markets as well as institutions, policies, regulatory frameworks and trading mechanisms.
  • Statistics – exploring statistical concepts important for portfolio management.
  • Programming in Python I – basics of object-oriented programming and concepts related to Financial Computing.
  • Algorithms I – basics concepts for algorithms such as data structures, recursions, sorting, and searching. 
  • Financial Markets II – examining the way different instruments introduced are assembled to build portfolios in the asset management industry.
  • Programming in Python II – Learning different libraries for applied Financial Computing like NumPy, SciPy, Matplotlib. Applying different financial models and simulations on financial data.
  • Econometrics – statistical methods as applied to finance in modelling and forecasting the financial markets. 
  • An alpha design I – introduces the basic concepts and frameworks in creating a positive alpha algorithmic trading strategy. Strategies such as statistical arbitrage, pairs trading, convergence and divergence strategies.
  • Algorithms II – covering core knowledge required to understand numerical algorithms for computational finance.
  • Risk Management – introductory risk management seeking to introduce a comprehensive overview of the subject. Risk/Return fundamentals, use of derivatives, VaR and other models used to measure risk in different types of securities.
  • Alpha Design II – Builds on the previous course introducing new Alpha generation models with applied risk management frameworks and extended concepts of applied trading.
  • Machine Learning – with the help of python and knowledge of Econometrics and Statistics this course introduces basic concepts of machine learning with practical examples using logistic regression, neural networks, support vector machines, boosting and decision trees.
  • Alpha Design III, with Machine Learning – additional alpha strategies introduced where machine learning and optimization methods are introduced to improve the risk/return profiles of the particular strategies. 
  • Capstone Course (Dissertation Project) – the final dissertation project gave every student an option to choose between 8 topics were somewhere based on building strategies from scratch and reporting the results, backtests and rational while others were based on building up a paper case based on academic or industry research. This has been interesting as a peer-review by other students have been considered in grading as well as a final video-conferencing presentation and defence of the project in front of the professor and other students where Q&A session also constituted in the successful pass of the final part of the course. 

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World Quant University

I believe around the midway of 2018 the whole course was revamped and the new learning platform launched where students from the old one, including me, were migrated to the new learning platform.  This initiative is one of many that seeks to further improve and develop the learning process in the University. Moreover, an additional introductory data science module was also launched to provide the basics of data science and python to those that may not be coming from a background with an undergraduate degree or knowledge in the particular subject area. This also is a great introductory course, but it would go as far as offering you a taste rather than the full picture of data science for Finance such as the full two-year degree. In terms of the overhaul of the study program, I believe that a very good job has been done over moving to a more mathematical focused course base with solid scientific based studies rationale that resembles quite a lot similar programs offered by top Universities around the world such as Stanford, Cornell, Columbia, Carnegie Mellon and the University of Chicago.

New Platform
The New Platform UI

The new program’s courses:

  1. Financial Markets – the previous two course on Financial Markets have been merged into one covering or the foundational topics and history on the markets. There are additional case studies added on recent developments in HFT and the Dodd-Frank Act.
  2. Econometrics – the statistics and econometrics course have been merged into one that covers all the subject areas as well as the use of the R language for the application of models on financial data. Econometric, volatility, time series, regression and stochastic models would be examined.
  3. Discrete-time Stochastic Processes – this is a course that I would like have seen in the previous program as there was evident lack of practising Stochastic Calculus. A course exploring and breaking down different financial models in use to price Options and other derivatives as well as measure different types of risk inherent to the markets. 
  4. Continuous-time Stochastic Processes  – this course covers a lot of content that I have limited knowledge in and wasn’t really focused on in the previous program such as Feynman-Kac Theorem, Stochastic Calculus, Risk Neutral pricing. Brownian motion was briefly touched upon in one of the previous program’s courses though I feel that much more attention has been given on this subject matter at present.
  5. Computational Finance – computational Finance using python covering Monte Carlo methods, options pricing, risk management simulations with CVaR and VaR.
  6. Portfolio Theory & Asset Pricing – covering CAPM, MVP, SML, CML, APT, Bayesian Portfolio theory among others. Additional areas listed on this courses that I don’t recall studying over are the Stochastic Dynamic Controls, HJB equations, etc.
  7. Machine Learning in Finance – this course I believe to be the equivalent of the Machine Learning course from the previous program, though it is very likely there will be improvements in it.
  8. Case Studies in Risk Management – this is a very interesting course with practical applications and case studies that cover the most important topic in asset management. I believe to be a practical copy with a twist to the Risk Management course from the previous program.
  9. Data Feeds and Technology – major course providing some real-life implementation of knowledge and gathering of financial data for your models from different sources. A focused course on getting the right type of data through the use of python is of massive help getting proper exposure to real-life implementation of the studies and knowledge learned so far. API data feeds with Python as well as Excel/VBA for finance provides you with great work tools for your professional as well as personal work in Finance. This knowledge will also give you an edge on interviews. Technical analysis and charting are also covered to close the whole picture of data gathering and analysis – one of the main drivers in discretionary trading.
  10. Capstone Project – I believe this would be quite similar to the final project dissertation I have done in my studies where you have to develop full-fledged project and deliverables throughout the whole course. 
  11. Capstone Examination – This one is new as it looks like a comprehensive exam covering all the program. In the previous program we had a constant barrage of different exams of different sizes with different weights towards your final grade for your course, but not a separate exam course. 

 

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Subject Matter covered in the program

So far we have covered my initial experience as well as the digital transformation of the platform and the whole course. I can’t leave without noting the international nature of the whole faculty and the students taking part in the program. People from many different countries, continents and walks of life. There were seasoned bankers from New York and London doing the course just out of curiosity and its ability to provide complete flexibility and any missing points that they may have missed or to supplement their daily work. There were Finance professionals from Africa that were using the knowledge in this course to pivot from a Financial role to a Quantitatively Analytical one or Banking. An area which definitely can be improved upon is the interactions between students and further encouragement of online networking and exchange of contacts. While I have managed to expand my network through LinkedIn I think many students fell short on this matter. Many people found challenging the constant pressure of courses and exams coming one after the other where people have taken breaks, time-off or dropped out. 

Some key points about the content:

  • Valuable action-oriented content – providing with practical examples that are directly applicable in the real world with live examples of trading different instruments that can be implemented straight away with your exchange
  • Time commitment – a maximum of 16 hours spent each week on any one course even during the final Capstone project where a dissertation of 98989 thousand words was written. I did the research paper project while many others opt for the Technical one of building a particular strategy from a list of topics including the data, rationale, backtesting and results.
  • Self-learning friendly – constant progression from one course to the next one as there wasn’t a week in the whole period where there wasn’t a submission or a deadline of a group comment on the forum, online exam, mini-project submission.

There were students questioning the accreditation and the nature of the university, though it has to be noted the early stages of this educational start-up and the non-profit venture of the University. Yes, you don’t get to have direct exposure to Fortune 500 companies, Graduate Recruiters and in-person relationships with potential business acquaintances and a proper network as you would in a full-time degree course. Although you do save the massive amount of time, debt and wages you are going to sacrifice to do a full-time program. For example, the proposed total budget for the Berkeley MFE is $111,465. The outcome of the results from the degree and the skills and knowledge entirely depends on your person. The textbooks and materials thought in WQU are no different in any way shape or form to the ones that you have in the MFE courses provided by other Universities. Are you going to get the skills and knowledge that can be applied in the Quantitative space – Yes? Do you have access to the tools and mentorship required to complete the course – Yes? Should you go for it – definitely!! There is only upside to be gained on this matter. 

As far as I know, the University currently has a pending accreditation under review and the next few years it will definitely go forward with providing accredited degrees and gaining more credibility as it builds partnerships and relationships with educational bodies both in the US and internationally.

Finally, when it comes down to my person. One of my main focuses after the completion of the degree would be my continuous improvement in data science and programming skills with different datasets and question on the Kaggle Platform. I believe this to be one of the best learning and practical tools for polishing your skills as well as having access to world-class data sets and ranking of your skills. Another area would be trading and algorithmic development where my learning would be expanded on the Quantopian platform with its available financial data feeds and support community. Once I have confidence in my simulations and results I would like to demo trade through the API of exchanges such as FXCM and Crypto facilities . Yes, I am a fan of crypto. The final step would be attending hackathons both python based, data science-based and algorithmic trading ones. I have already done a couple of those and have found them a great source to network, learn new things as well as improve your skills. 

Where can you raise capital for your trading?

You can have the best trading ideas, strategy and implementation, but without sufficient capital to fuel it, it’s just a great idea. Raising capital for your trading becomes important once you have exhausted your funds, you have a solid track record of great performance and opportunities & ideas are everywhere. Once you are really ready to bring in clients money you always need to be cautious as to not oversubscribe investors or even raise too much money that doesn’t really fit in with your strategy. This could be of detriment to you and your ego that may result in underperformance of your strategy. It is not about raising as much money as possible rather raising justified amounts that perfectly fit into your current trading paradigm. Usually, the best way to raise capital is not to do it at all, rather reinvest your profits back in the business and grow organically alongside the market opportunities presenting themselves with time. You can always look into scaling with outside capital if successful at first and have reinvested profits numerous times. Although many times you are spot on with your working ideas and strategies so you have to get that cash injection as soon as possible to keep pushing forward. Even then one must always comply with all the requirements and pre-requisites by investors making sure there is transparency and the promised delivery of results is evident.  A business start-up is it trading or selling physical products shouldn’t be looking for additional rounds of cash without a clear strategy and having reinvested significant amounts of their profits back into the business beforehand. Investors should be wary of companies and start-up funds requiring second rounds of funding in a short period of time one after the other. This is highlighted with ones without significant cashflows or negative performance. For market caps going in the millions where the operations are on a bigger scale and institutional clients come in the growth and scale rates would usually slow down. There wouldn’t be a rush the more the fund/business progresses to raise capital.

Capacity is the amount of equity a strategy can generate good returns on. It is far, far easier to generate a high Sharpe ratio trading a $100,000 account than a $100 million account. There are many simple and profitable strategies that can work at the low capacity end that would be totally unsuitable to hedge funds or any fund in general. (Chan, 2008) On the more practical aspect, algorithmic trading generally requires a far larger capital base that would be utilised for retail discretionary trading, this is simply due to the fact that there are few brokers who support automated trade execution that does not also require large account minimums. The most prolific brokerage in the retail automated space is Interactive Brokers, who require an account balance of $10,000. Furthermore, the Pattern Day Trader requirements as defined by the Securities and Exchange Commission require a minimum of $25,000 in account equity to be maintained at all times, in certain margin situations.

If you are not completely familiar with the sources of capital or the ways to approach them, you might need a dedicated professional who would assist you in this matter. Fundraising and Investors relations is a subject area that requires a high level of skills, manners and most important networks. Being able to communicate your idea, strategy or business in the right way and to the right audience can make or break your capital raising process. Most of the times the founder or the main company officer would act as the fundraiser where trusted associates with appropriate networks may bring additional value and capital. Moreover, investors would also expect the generator of the strategies or business to be able to stand behind any proposal with an equal or significantly high proportional base of capital as well. As the old saying goes “you have to put your money where your mouth is“. Additionally, founders and people with significant interest and control in the business putting a large portion of capital or proportion of their whole net-worth behind a trading strategy or business provides a real reassurance and guarantees commitment and confidence in the venture. Alignment of interest between the management and the investor should be demonstrated by the founder’s/management commitment of capital at all times.  In addition, the due diligence performed on the team behind the trading business is of great importance as well. Important factors are ones such as previous educational and qualification background, verified track record and past experience. On-boarded advisors and partners that can help you raise funds and run your business are also of crucial importance. You can also attract investors with your unique cost structure.

Potential Sources of Investors:

  1. Non-institutional capital sources
  • Friends and Families – The first people most would refer to in their fundraising process start with friends and family. As these are trusted sources and no due diligence is required on their side it makes it fast and easy source of capital. Although this is restricted by the particular size of capital that can be committed. This makes for a great start as well as the support of relatives received, but it puts additional pressure and really tests your confidence in your performance and strategies. You are putting forward more than reputation or clients’ money on the line – healthy relationships if things are to go wrong. 
  • Retail Investors & Peers in the Industry can substitute a great knowledgeable investor in your start-up that may also bring fresh advice and ideas to the table.
  • Private Accredited Investors in the face of Ultra-High Net-worth Individuals(UHNI) and High Net-worth Individuals(HNI) – minimum due diligence as they would come prepared with their KYC/ AML and credentials. the amount of attention and requirements they have to contribute to your business. They also require constant attention and keeping up the relationship and the ongoing roadmap and progress.
  • Venture Capital (VC) /Seeders/Angel Investors are a great source of initial capital that comes with its costs. Angel Investors would usually have experience in the particular fund/strategy/business or have had their previous exit in a very similar company. They will bring along a myriad of knowledge, experience and advice as well as marketing and operational guidance. Although they would also require larger and deeper checks and due diligence passed as well as share revenue or equity in the company. Many business owners find it hard at first to give away part of their coveted companies at the start.
  • Financial Advisors – can bring a good amount of capital if you are willing to pay the price and really spend the time to build a proper relationship and connection with them. On the downside, they may only bring the capital without the connection with investors or advisory assistance. 
  1. Institutional Capital Sources
  • Family Offices are usually set up by a number of wealthy families, investment professionals or wealthy individuals who have gathered together to manage their fortune and grow the value of their portfolios together. They would usually bring a large amount of capital knowledge and sophisticated risk management. One of their main targets is the preservation and growth of their capital. They would be very cautious and require a lot of relationship building and due diligence passed.
  • Funds of funds would have a sophisticated investment team with professionals that have a proven track record and credentials. It may take a long period of time before a fund of funds invests in your fund as they would require all the traditional checks as well as close monitoring of the operations and performance of the fund for a set amount of time before committing capital.
  • Foundations and endowments manage assets for non-profit organisations which are very cautious about where exactly they invest due to significant reputational, ethical and moral standards that they have to comply with considering the source of their capital. These organisations would usually have a long-term time frame and very low turnover of investment vehicles they put money in. Great risk controls, infrastructure and years of proven track records would be some of their main requirements which make them a very unlikely source of funds for a start-up investment business.
  • Pension Funds are quite similar in their investment and decision-making process to the foundations and endowments as they have long-term views requiring low volatility strategies and consistent returns. As these funds manage the pension pots of many companies through different industries they are super sensitive to where they invest and their requirements are high making them also an unlikely start-up funder.
  • Sovereign Wealth Funds would be usually one of the biggest investment funds with whole countries behind them and massive amounts of capital to invest. Very large size, long track record and significant connection with the particular fund/government would be required to get in capital from these vehicles. If you are not one of the biggest funds out there it is unlikely that you would ever cross paths with these funds.

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